Cryptocurrencies - what mistakes should we avoid?

How to invest in cryptocurrencies so as not to lose

Since Bitcoin and other cryptocurrencies have become speculative objects, they attract more and more people who want to multiply their savings. The history of the Bitcoin price shows the power of speculation and how quickly you can make a lot of money, but you can lose everything just as quickly. Cryptocurrency trading is almost identical to trading in securities or foreign currencies (Forex). A simple rule - buy low, sell high. Easy, right? However, life verifies very quickly and teaches us the rules of the game, most often we pay dearly for it with our capital. Whether we earn or lose on the stock exchange consists of a lot of factors, including the basic - mentality.

Basic mistakes of new investors

The topic is quite extensive, so I decided to divide it into two parts, both are equally important and worth reading to learn from other people's mistakes, not your own. In this article, I will present you the basic mistakes of new cryptocurrency investors that are commonly made. Remember, this is not just a theory, write down these mistakes and look at these notes from time to time and you will find yourself wanting to make each one of them. Despite the fact that almost everyone knows not to do it and does it anyway - our psyche and the ability to make decisions under stress play a role here.

Don't invest more than you can lose

This seemingly trivial mistake is very often made and has quite serious consequences. Now imagine a situation that you have saved PLN 10,000, which are sitting in your bank account and, apart from losses resulting from inflation, they do not bring you anything. You decide to invest them to multiply your capital. How much will you invest? If you buy cryptocurrencies for PLN 1,000 and earn 10%, you will only be PLN 100 ahead, right? But take into account that if a given cryptocurrency drops in price by 10%, you will lose only PLN 100, which in the case of investing all your savings would bring you as much as PLN 1,000 loss. Such a loss will already hurt and here your psyche will start playing tricks on you. You will survive PLN 100 somehow, but when you see that PLN 1,000 disappears from you, you will start to think irrationally and you will start making more mistakes to get back. Subsequent steps taken in panic usually bring even more losses and so begins the domino of errors that will wipe your deposit very quickly. Remember - if you can't earn by investing PLN 100, you won't earn even if you invest a million. By investing only as much as you can lose, it will allow you to stick to your plan, make well-considered decisions and protect your capital. In addition, it will not interfere with your private life, because you will know that you can lose this money.

FOMO

Behind this concept lies your stamina, or rather your psyche. FOMO - fear of missing out in free translation, fear of losing. In the world of cryptocurrencies, it is also often called Don't jump on a moving train. It consists in the fact that during sudden increases in the price of e.g. Bitcoin, you start to feel that you are losing an opportunity to earn money and you see that the price is still growing, you think that if it has grown so much, it will continue to grow and you buy at an exorbitant price. You just jumped on a moving train. Nothing will grow indefinitely, and almost always sudden increases are followed by sudden decreases, the so-called correction. You just succumbed to FOMO, the price will most likely recover now, and you will either sell at a loss or be forced to hold until the price is higher than what you bought it for. It is very well illustrated in the graphic below, the next stages of your thinking. Remember - buy after decreases, not increases.

FUD

It can be said that this is the opposite of FOMO. FUD - fear uncertainty doubt in free translation fear, uncertainty and doubt. In the financial markets, this is also called "panic" and it can be a good opportunity to earn, but also to lose. Often this situation is caused by the so-called big fish, i.e. people with huge capital that can control the price on the market, and thus your movements. As well as the so-called fake news , namely they provide false information, thus causing fear and panic in the market, which makes people sell their assets. FUD is when the price drops very sharply and loses quite a large percentage with great impetus. During such a decline, many small investors, fearing the loss of capital, sell cryptocurrencies as soon as possible, no matter at what price. The more people start selling, the more the price goes down, the more the price goes down, the more it causes more FUD which causes even more people to sell off their portfolio. Then it turns out that it was fake news and the price returns to normal. You no longer own this cryptocurrency, and the people responsible for this situation bought it back at a much lower price.

Don't invest in something you don't understand

I have personally encountered cases where people invested in a project on the blockchain, and they had absolutely no idea what it was. This is another basic error. Starting the adventure not only with cryptocurrencies, but with any other type of investment, you first need to understand it. It's illogical to invest your money in something you don't know, yet so many people do. The basis of investing is continuous education, tracking progress on an ongoing basis, keeping up with changes and reacting to these changes. Before you start investing in cryptocurrencies, take a few months to understand the whole system of how cryptocurrencies work, as well as investment methods. This is really a very broad topic, but with the right amount of time and willingness, you can learn everything. The Internet is full of information and knowledge, you just need to reach this knowledge and verify that what you read is true. You can also take advantage of paid online and stationary training, in which you will get specific knowledge in a "pill". There are very valuable trainings online that will shorten the time of your education to a minimum, because someone has extracted real information from the maze of knowledge that is available on the Internet.

Copying the moves of others

During the 2017 bull market, we had a flood of “signal groups” in the cryptocurrency community that will tell you what and when to invest for a fee. The people who make up these groups are common scammers, no one ever knows 100% whether the price will go up or down. The main argument that they themselves do not know what to enter is a simple calculation. If they know the market so well, they know where to earn, then why are they extracting money from people for these signals? Another thing is training, e.g. in trading, where the instructor introduces you to the techniques of reading the chart and drawing conclusions, and not only offers information on what and when to invest. Copying, unfortunately, does not end with joining paid signal groups. It is often the case that new investors will “find” someone on social media who boasts of very good results. He shares his moves publicly on his profile. He will succeed once, twice, fifth, but luck will not be with anyone all his life. They do not blindly follow their "guru" because if he makes a mistake, you will lose money.

You are responsible for yourself

Not only in investing in cryptocurrencies, but in any other business, education is the basis. At some point you may have the so-called God Effect, you will think that you already know everything and nothing can surprise you. This effect can turn your winning streak into a loss of all your capital very quickly. In these times, we have huge access to knowledge practically for free - the Internet, knowledge enclosed in a pill - books and the knowledge and experience of others - training and workshops. Use it as often as possible, and you will discover that the more you learn, the more you will want to expand this knowledge. Thus, I invite you to read the second part of the article about the basic mistakes made by new investors.

Forget about refshare programs, where you deposit, for example, $ 1,500 and withdraw multiplied plus profits for referrals. Sooner or later such a company will declare bankruptcy along with your money.